GOVERNOR LINGLE PROPOSES TARGETED TAX RELIEF FOR HAWAI`I RESIDENTS
For Immediate Release: January 17, 2008
HONOLULU – Governor Linda Lingle today announced a targeted package of tax relief measures totaling $102.1 million over two years ($42.6 million in FY09 and $59.5 million in FY10) to help ease the high cost of living for Hawai‘i residents.
The measures include providing an additional tax exemption for families with children, increasing the dependent care credit for families with children or aging parents, reducing the tax burden some seniors must pay on their income during retirement, providing a refundable tax credit for modifying a home to accommodate an aging or disabled family member, and helping parents save for their child’s college education.
In addition, taxpayers once again qualify for a one-time tax refund as mandated under the State Constitution because of the large surplus over the past two years.
“It is critical that we provide meaningful, immediate tax relief to middle and lower income families, as well as our kupuna to help them cope with the high cost of living,” said Governor Lingle. “While the state’s moderated economic growth will not allow the type of comprehensive, wide ranging tax relief my Administration has proposed in prior years, our supplemental budget includes targeted tax relief to help those who need it most.”
Targeted tax relief will also put more dollars back into the economy to spur economic activity.
The Administration’s 2008 tax relief package includes:
‘Ohana Tax Reduction Act of 2008
To ease the burden on taxpayers raising children and caring for kupuna, the Administration is proposing the “‘Ohana Tax Reduction Act of 2008,” which would expand and enhance the tax credit for adult care or child care costs and provide an additional tax exemption for children 18 years or younger.
The measure, which was also proposed in the 2007 legislative session, would provide an additional $1,000 exemption for each child 18 years or younger for families with annual household incomes of $100,000 or less, and $500 per child for those with household incomes over $100,000 and up to $200,000. In addition to the added exemptions, this measure would expand and enhance the existing tax credit of up to 25 percent of the costs of adult care or child care for a family member by increasing the total costs eligible for the credit to a maximum of $5,000 of costs per dependent per year. This would include preschool, child care, adult day care, and care for disabled dependents.
This change would save taxpayers $34.9 million over two years.
Retirement with Dignity Tax Relief Act of 2008
The Administration is proposing a measure to help retirees keep more of their retirement income. In Hawai‘i, government retirees and those who retired from a private company with an employer-funded pension plan do not have to pay state income taxes on their pensions. However, individuals who worked for most small businesses with 401(k) and IRA retirement accounts must pay income taxes on either all or a portion of the retirement income they receive.
To remove this disparity, the Administration’s proposal would exempt the first $25,000 in income from any source such as personal savings, rental income, annuities or retirement savings accounts for persons aged 65 and over. The exemption would be phased out as a retiree’s income increases and would not be applicable for those single taxpayers earning $75,000 or more annually.
Retirees would save $20.3 million per year under this act.
Aging in Place Tax Credit
To make it easier and more practical for seniors to stay in their own homes or with their family, the Administration is proposing a refundable tax credit of up to 50 percent of the costs to modify a personal residence to accommodate an aging or disabled family member. Examples of qualifying expenditures include grab bars in a shower or bathtub, ramps or inclines, and larger doorways for wheelchairs. The maximum credit would be $2,500 for a single taxpayer or $5,000 for a married couple. The tax credits would save residents $8 million per year.
Constitutional Rebate
For the second year in a row, Hawai‘i taxpayers are once again entitled to a constitutionally required tax refund. Under the Hawai‘i State Constitution, a tax refund is required whenever the state’s general fund balance exceeds 5 percent of general fund revenues for two successive fiscal years. The amount and form of the refund will be determined during the legislative session.
HI529 Hawai`i College Savings Plan Enhancement
To help parents save for their child’s higher education, the Administration is again proposing up to a $10,000 deduction on state tax returns for single filers and $20,000 for married filers. For each dollar a parent sets aside in Hawaii’s approved college savings plan, the parent can deduct this from their taxable income, up to the prescribed limits. Relatives such as grandparents, uncles and aunts who set up a higher education savings account, would also be eligible to claim this deduction. The measure would provide $2.8 million in tax savings per year.
Reduction on Cell Phone Bills
In 2004, a surcharge of 66 cents per month was placed on each cell phone line to implement the emergency locator system known as Wireless Enhanced 911. The surcharge provided the funding needed to acquire technology that enables emergency dispatch operators receiving 911 calls from wireless phones to see the caller’s identification and location. The system has been implemented and is operating in most urban locales and will be expanded to remote rural areas. The Administration proposes to reduce the surcharge to 43 cents per month, saving $2.5 million per year for cell phone users statewide.
####
For more information, contact:
Lenny Klompus
Senior Advisor – Communications
Phone: (808) 586-7708
Russell Pang
Chief of Media Relations
Phone: (808) 586-0043
